By STEPHANIE LEE Staff writer

Published 1:43 pm, Tuesday, November 16, 2010

Prisoners across New York have been collecting potentially millions of dollars in unemployment benefits while behind bars at the state's expense, the state Department of Labor has learned.

Eighty-four inmates have been caught receiving illegal unemployment payments totaling at least $178,000, officials from the Department of Labor and the New York Sheriffs' Association announced at a news conference Tuesday.

The news of the fraud arrives in the wake of the recession, a time in which New York faces a $9 billion deficit and steep unemployment rates.

Four cases are currently pending prosecution, said state labor commissioner Colleen Gardner. Two are linked to the correction facility in Orange County, one to Duchess County and another to Chemung County.

An additional 251 prisoner payments have been placed on hold for investigation, and a total of more than 280 cases are under criminal investigation, officials said.

The number of prisoners who have currently been caught is based on data provided by 60 percent of counties as of Monday, Gardner said. As of October, the New York State Sheriffs' Association had agreed to provide inmate data from all 57 county correctional facilities to the Department of Labor every other month.

The scam appeared to have been carried out by inmates' friends and family members, who, outside of prison, filed for unemployment insurance with the state Department of Labor by phone, Gardner said.

After providing the inmate's Social Security Number and a PIN number, they would collect the money, which was distributed either via direct deposit or a debit card registered in that person's name, Gardner said.

The Department of Labor became aware of the scam in part because of an audit conducted by the state comptroller last spring, after which officials found 24 cases of inmates receiving unemployment benefits, Gardner said.

The top five county correctional facilities generating overpayments in unemployment since roughly the beginning of 2009 are located, in order, in Suffolk County, which has paid out an estimated $58,800, Onondaga County ($38,500), Albany County ($27,000), Orange County ($23,000) and Westchester County ($13,300), according to estimates by the state Department of Labor.

Stephanie Lee can be reached at (518) 454-5057 or by e-mail at slee@timesunion.com.